Abbott Laboratories plans to spend US$19.3 billion to buy St Jude Medical Inc in a cash-stock deal that aims to strengthen the medical device maker’s stake in cardiovascular care.
The combined company would offer devices in nearly every area of cardiovascular care, competing directly with industry leaders Medtronic Inc and Boston Scientific Corp.
It said the acquisition would blend St Jude’s pacemaker and implantable defibrillator business with Abbott’s focus on artery-opening stents and heart-repair products.
Wells Fargo analyst Larry Biegelsen said the deal makes sense because “there is very little overlap” between the companies’ offerings. The combined business would be better able to compete with larger companies in the device space, including Johnson & Johnson.
North Chicago, Illinois-based Abbott said St Jude shareholders would receive US$46.75 in cash and a portion of Abbott stock for each St Jude share. The total consideration adds up to about US$85 per share.
That represents a 37 percent premium to Wednesday’s US$61.95 closing price of St Jude shares.
The deal value totals US$25 billion based on Abbott’s recent stock price and assuming about US$5.7 billion in St Jude debt.
Abbott makes medical devices and generic drugs, but infant formula and nutritional beverages, which includes the Similac, Ensure and Pedialyte brands, make up the company’s biggest business.
In February, Abbott said it would spend US$4.8 billion on Alere Inc to expand its medical testing business.
St Jude’s expertise selling medical implants to hospitals should open new opportunities and help drive sales for Abbott’s devices, Leerink Swann analyst Danielle Antalffy said.
“Abbott’s device business has been underscaled, driving underperformance over the last few years,” Antalffy said in a note to investors.
Abbott said the boards of both companies had approved the deal for St Paul, Minnesota-based St Jude.
The companies expect the deal to close in the fourth quarter, but the acquisition must still be reviewed by regulators and approved by St Jude shareholders.
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